SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
SECURITIES AND EXCHANGE COMMISSION v. ANDREW S. PITT, CONECTISYS
CORP., DEVON INVESTMENT ADVISORS, INC., B&M CAPITAL CORP., MIKE
ZAMAN, and SMITH, BENTON & HUGHES, INC., United States District
Court for the Central District of California, Civil Action No.
96-4164 (MRP) (ANx)
Litigation Rel. No. 15909 / September 29, 1998
DISTRICT COURT ENTERS FINAL JUDGMENTS IN CASE INVOLVING
CONECTISYS STOCK MANIPULATION
The Securities and Exchange Commission ("Commission") today
announced that on September 22, 1998, the United States District
Court for the Central District of California entered a final
judgment of permanent injunction against Conectisys Corporation
("Conectisys"), which is the final relief obtained by the
Commission in this case. The Commission brought this action in
June 1996 to enjoin the ongoing manipulation of the market for
Conectisys stock. In its final judgment against Conectisys, the
Court permanently enjoined the company from future violations of
Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933
("Securities Act"), the registration and antifraud provisions.
The Court also ordered Conectisys to disgorge $175,000 of
proceeds derived from its fraudulent conduct.
The entry of final judgment against Conectisys follows
earlier judgments the Court entered on June 29, 1998 against
defendants Andrew S. Pitt ("Pitt"), Devon Investment Advisors,
Inc. ("Devon"), Mike Zaman ("Zaman"), B&M Capital Corp. ("B&M"),
and Smith Benton & Hughes, Inc. ("Smith Benton"). On June 29,
the Court permanently enjoined Zaman, Smith Benton, and B&M from
future violations of Section 17(a) of the Securities Act, Section
10(b) of the Securities Exchange Act of 1934 ("Exchange Act"),
and further enjoined Zaman and Smith Benton from violating
Section 15(c)(1)(A) of the Exchange Act. The Court also ordered
Zaman, Smith Benton, and B&M, jointly and severally, to disgorge
$611,193 in unlawful proceeds derived from the manipulation of
the market for Conectisys stock. The Court enjoined Pitt from
future violations of Sections 5(a), 5(c), and 17(a) of the
Securities Act, and enjoined Devon from violating Sections 5(a)
and 5(c). The final judgment against Pitt and Devon also ordered
them, jointly and severally, to disgorge $399,980, and ordered an
additional $50,000 of disgorgement against Pitt, jointly and
severally with Conectisys.
The final judgments against Conectisys, Pitt, Devon, Zaman,
Smith Benton, and B&M were entered following a bench trial held
in July 1997. Based on the evidence presented at the trial, the
Court found that Pitt and Zaman together planned the manipulation
of Conectisys stock, and Zaman and Smith Benton carried out that
manipulation with Pitt's assistance. In the course of carrying
out the manipulation, Zaman and Smith Benton controlled the
number of Conectisys common shares available for sale on the
market, dictated the prices at which those shares traded, engaged
in "daisy chain" trading with market participants to fill retail
customer orders, and artificially increased the price of the
stock purchased by retail customers. The Court also found that
Pitt and Conectisys offered and sold restricted stock to private
investors based on material misrepresentations and that Pitt and
Conectisys drafted a false and misleading business plan that was
supplied to potential investors. Finally, the Court found that
Pitt, Conectisys, and Devon sold unregistered securities in
violation of Section 5 of the Securities Act.
The Commission also today instituted and settled an
administrative proceeding against Mike Zaman. On consent, the
Commission permanently barred Zaman from association with any
broker, dealer, investment adviser, investment company or
municipal securities dealer.
This enforcement action was part of the Commission's four-
pronged approach to minimizing Microcap fraud: enforcement,
inspections, investor education and regulation. For more
information about the SEC's response to Microcap fraud, visit the
SEC's Microcap Fraud Information Center at:
http://www.sec.gov/news/extra/microcap.htm.